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Cost effective environment
Latvia extends notable cost advantages to investors, encompassing competitive labor and real estate expenditures, alongside favorable tax rates. Combined with robust productivity in both manufacturing and services, Latvia establishes a highly cost-efficient business environment that yields compelling returns on investment.
The annual "fDi European Cities and Regions of the Future 2022/23 Rankings" by fDi Intelligence revealed that four Latvian cities, namely Riga, Jelgava, Valmiera, and the port city of Ventspils, have secured prominent positions within the top 10 across various categories. These cities excel in cost-effectiveness, connectivity, and foreign direct investment (FDI) strategy.
Latvia showcases a workforce that stands strong on the international stage, encompassing diverse levels of expertise and maintaining a competitive cost structure. In terms of wage-adjusted labor productivity (measured as labor productivity relative to average personnel costs), Latvia stands among the frontrunners in Europe, as per Eurostat data.
Tax rates
From 1 January 2018, Latvia has a new corporate income tax (CIT) under which retained earnings are exempt from CIT, and only distributions are taxed. The CIT rate on gross profit distribution is 20%. Latvia also has a progressive personal income tax (PIT). Income below EUR 20 004 a year is subject to PIT at the rate of 20%. Income from EUR 20 004 to EUR 78 100 a year is subject to PIT at the rate of 23%. The part of income exceeding EUR 78 100 a year is subject to PIT at the rate of 31%. PIT for income from capital and capital gains is 20%.
Special economic zones
Latvia has 5 free economic zones (Riga, Ventspils, Liepaja, Rezekne and Latgale) that benefit entrepreneurs. The main benefits for companies operating in Free Ports and SEZ territories are tax rebates on the real estate tax, corporate income tax (applies in case of withdrawal of dividends, otherwise - CIT in Latvia is 0%).
SEZ offer tax Incentives in the form of:
- 80% rebate on the applicable Corporate Income Tax, which can make the tax rate as low as 4%
- 80% rebate on the applicable Property Tax which can make the tax rate as low as 0.3%
Labour expenses
In 2022 the average hourly labour costs in Latvia were EUR 11.5, which is significantly below the average levels in the EU and Eurozone, according to data published by Eurostat. For example, Germany’s labor costs are approximately four times higher than in Latvia. Average salary rates depending on industry and job title can be obtained by contacting LIAA Investment Promotion Division.
Real estate
Given its relatively sparse population density, Latvia offers a range of location options for both industrial and office activities. Across major cities, numerous unoccupied factory structures can be found, complemented by historic urban cores that are undergoing a transition from residential to commercial, entertainment, and retail purposes. Beyond standalone properties, various business-oriented parks have been established or are currently in development, catering to diverse tenant requirements.
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Contacts
Riga office
Address: 2 Perses Street, Riga, Latvia, LV-1442
Web: www.investinlatvia.org
For more information: invest@liaa.gov.lv
For tailored advice contact our team of experts